Landlords remortgage to raise capital

Robyn Hall

January 17, 2013

In the last 12 months the proportion of landlords refinancing houses in multiple occupation has jumped from 55% in quarter four of 2011 to 80% in quarter four of 2012.

Similarly remortgaging on multi-unit freehold blocks has increased from 76% to 78% year-on-year.

David Whittaker, managing director of Mortgages for Business, said buy-to-let gross yields are so attractive because of the mess the first-time buyer market finds itself in.

He said: “Property prices are flat and tenant demand is stratospherically high which is why more landlords are refinancing and manoeuvring themselves into a position to add to their portfolios.

“While high demand and subdued property prices are the carrot, certain lenders are the stick, particularly Royal Bank of Scotland and Irish lenders which are demanding landlords refinance elsewhere as they try to reduce their exposure to property.”

Gross yields on mainstream buy-to-let fell marginally from 6.7% to 6.4% between quarter four and quarter three however they have increased from 6.1% to 6.4% over the past year.

This has enticed more landlords into adding to their residential investment portfolios.

Similarly gross yields on complex property dropped slightly compared to quarter three but have increased compared to 12 months ago.

Yields on MUFB fell from 8.8% in quarter three to 8% in quarter four while HMO yields fell marginally from 11.1% to 10.9% over the same period.

However gross yields on HMOs were up from 9.9% a year ago and up from 7.1% on MUFBs.

Semi-commercial property bucked the trend of a decline in gross yields between quarter three and quarter four.

They jumped from 7.1% to 8% reflecting an increase in demand for this type of property by investors.

The number of buy-to-let lenders increased in quarter four from 25 to 26 due to the arrival of InterBay Commercial which offers landlords a more generous stress test calculation.

The number of products available dipped 5% from 465 in quarter three to 444 in quarter four although this is normal as lenders withdraw products and prepare fresh launches for the New Year.

But the average number of products available year on year has flattened.

Whittaker added: “Historically lenders always withdraw plenty of mortgages in the lead up to Christmas and lay the groundwork for big product launches in the New Year. So we expect the range of products to recover and improve in 2013.

“All eyes will be on Funding for Lending this year. It has flattered to deceive so far but plenty of the head honchos at the Bank of England think it will spring into action in 2013.

“If it does we should see the availability of buy-to-let mortgages increase. Landlords have been saying lenders aren’t doing enough to help them and cater for their ambitions so 2013 should bring more joy for frustrated investors.”

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